Fraud case shadows an Icahn nominee

1of 2Federal-Mogul Corporation (OTCBB:FDMLQ), today announced that President and Chief Executive Officer Jose Maria Alapont has in addition been named Chairman of the Board of Directors for Federal-Mogul, effective immediately.

2of 2FILE - This file photo combo of file photos shows Bill Ackman, left, of Pershing Square Capital Management, on Feb. 6, 2012, in Toronto, and financier Carl Icahn, on Feb. 7, 2006, in New York. A clash between Wall Street titans is flaring again Friday, Feb. 15, 2013 after Carl Icahn grabbed a 13 percent stake in Herbalife, a supplement company that Pershing Square Capital Management's William Ackman shorted heavily and very publicly, calling it a massive pyramid scheme. The filing, which was published late Thursday, sent shares of Herbalife soaring more than 20 percent before the opening bell Friday. (AP Photo/Pawel Dwulit, Shiho Fukada, File)Photo: Pawel Dwulit and Shiho Fukada, STF

One of Carl Icahn's three nominees to serve on Transocean's board has been dogged for nearly a decade by a criminal complaint in Spain that accuses him of taking part in a multimillion dollar fraud against employees of a company where he formerly was an executive.

Icahn, a billionaire investor, was aware of the still-pending case against Jose Maria Alapont involving his work for an affiliate of French auto parts manufacturer Valeo, but didn't disclose details in March when he nominated Alapont and two others to challenge Transocean's board picks.

The independent shareholder advocacy group that is supporting Alapont, Institutional Shareholder Services, also was aware of the case, but didn't mention it in its endorsement of Alapont last week.

And the company where Alapont served as CEO from 2005 until last year, Federal-Mogul Corp., didn't discuss the case in his employment agreement or annual reports filed with U.S. regulators during that period - even though prosecutors had proposed a three-year prison sentence the year before Alapont took the Federal-Mogul helm, according to records.

Icahn has been Federal-Mogul's board chairman since 2008 and owns or controls three-quarters of the company's outstanding shares.

"I've always believed the more disclosure the better, and let the voters decide," said Charles Elson, a corporate governance expert at the University of Delaware.

Through his lawyer, Andrew Langham, Icahn declined to comment.

Alapont, 62, said in a brief telephone interview from London that he has never been served with the Spanish complaint or received any notice of filings related to the case.

"In fact, my only involvement was as a voluntary witness in a proceeding in September 2002," Alapont said.

Cheryl Gustitus, a spokeswoman for Institutional Shareholder Services, said in an email that the group has been aware of the complaint against Alapont and nine others. Based on its own research, the group doesn't believe the complaint raises questions about Alapont's suitability to serve on the board at Transocean, the world's largest offshore drilling contractor.

"We're aware that the precipitating action was a decision by the Valeo board to close a plant, that this was not an accusation of a personal criminal act, but a criminal complaint filed in response to a business decision which, in the U.S. and most other jurisdictions, could not have been prosecuted as a criminal action," Gustitus said.

Federal-Mogul spokesman Steve Gaut said his company was aware of the criminal complaint "and assessed the unique facts of the case, and concluded that disclosure was not required." He declined to elaborate.

Gustitus said Institutional Shareholder Services believes that should the case proceed through trial, the likely remedy would be monetary damages, which Valeo would have to cover. She asserted that prison time is not expected, "despite the language in the complaint."

But one of the prosecutors handling the case, Soledad Carceles Aleman, said in a telephone interview from her office in Murcia, a city in southeastern Spain, that Alapont still faces the possibility of being ordered to prison. He is a Spanish citizen.

No trial date

The prosecutor said a trial is expected, though no date has been set.

She said the employees want to be "restored financially and get their expenses." But, Carceles Aleman said in Spanish, Alapont "could be convicted of a crime … he could go to jail because there is a criminal section to this."

The main charge in the case is fraud against the workers of Valeo, amounting to 12 million euros, or $15.7 million, Carceles Aleman said. According to the complaint, workers alleged their rights were violated because the company didn't negotiate in good faith and sold the factory with the intention of ridding itself of the workers' demands related to their retirement plan, among other things.

Alapont said the case involves the sale 20 years ago of a small Spanish manufacturing facility to a local company. He said the broader employee claims were settled in 1994, but in 1997 a group of employees commenced a legal action against the company and its directors and executive officers, leading to the criminal complaint. The current complaint is dated 2004.

Carceles Aleman said she hopes the matter is resolved quickly. It has dragged on for many years because of difficulties with the legal process, she said.

"Some of the associates of Valeo are from France," Carceles Aleman said. "Each time we had to cite them or try to get a statement from them, they had to go through the French embassies or the secretary of state of their countries, and that is why it has been delayed."

Transocean stake

Icahn disclosed earlier this year that he had acquired a sizable stake in Transocean and would push aggressively for change. His efforts have fed growing rancor leading up to Transocean's May 17 annual shareholder meeting in Zug, Switzerland.

Icahn is urging fellow shareholders to support his proposal to increase the company's dividend to $4 a share and elect three new board members, including Alapont. Transocean has proposed a $2.24 dividend and re-election of its entire slate of board members.

The Swiss-based company, with major offices in Houston, has defended its board and business strategy and accused Icahn of handpicking board nominees who are closely tied to him and lack relevant industry experience.

It has not endorsed Icahn's third board nominee, John Lipinski, CEO and president of CVR Energy. The group has recommended that Transocean shareholders reject incumbent nominees J. Michael Talbert and Robert Sprague to make room for Alapont and Merksamer.

Harry Weber is a veteran reporter covering global energy news for the Houston Chronicle. Harry previously spent 12 years as a reporter and editor for The Associated Press covering a wide range of subjects, including energy news, aviation, general business news, legal affairs, politics and the environment. Major stories included the Gulf oil spill, the downturn in the airline industry, Hurricane Katrina, the Atlanta courthouse shootings, 9/11 and the murders of two Dartmouth College professors. While at the AP, Harry was assigned to mentor other reporters, providing coaching, assistance, career support and at times supervision. Prior to AP, Harry worked for four years as a reporter at two daily newspapers in the Boston area.